In 2022, we reached the pay equity tipping point. As legislators across the country advanced regulations promoting pay transparency and pay equity, sentiment shifted dramatically among the workforce. According to data just released by the Pew Research Center, American women earned 82 cents for every dollar earned by men in 2022. This was only a slight improvement over 2002, when women earned 80 cents to every dollar earned by men. At this rate it will take until 2066 to achieve gender pay parity.
It’s time for employers to take a more active role in driving equity and transparency — quickly. Today, nearly one in four employees lives in a place where employers are required to share information on salary ranges. These new laws are redefining standards for transparency, generating buzz in the media, raising new questions and expectations among the workforce, and drawing the attention of boards and investors.
HR and people leaders are on the frontlines of all this change, and the task ahead of them is enormously complex. The onus is on them to address the sometimes competing expectations of senior leaders, regulators, employees, investors and boards in this new era of pay transparency — where pay transparency risks attrition and other huge sunk costs unless it adapts in different contexts.
Here’s a closer look at the drivers behind that complexity, and how forward-thinking HR and people leaders use adaptive pay transparency to provide the right information at the right time.
The compliance challenges facing HR and people leaders
In OpenComp’s 2nd Annual State of Pay Equity 2023 report, which reflects the opinions of 500 CEOs, CFOs, and HR & People executives, 70% of respondents said they lack the resources to address pay equity, even though 91% called pay equity an organizational priority. Forty-eight percent called salary ranges and compensation philosophies their most needed resources. Leadership buy-in was another top-reported need.
Without these fundamental elements in place, HR and people leaders aren’t equipped to deal with the complicated practical and psychological aspects of pay transparency. This is especially true in the absence of national standards for pay transparency laws, where the compliance landscape is complicated and confusing, varying across different states and cities. Remote work adds another twist to that complexity, as some laws require states to comply if there’s even a potential that they’ll hire someone living in that state or jurisdiction.
Perhaps the most far-reaching and complex law is California’s comp data reporting requirement. If a U.S.-based company with 100 or more employees has even one employee living in California, they must comply with the state’s comp data reporting rules.
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Adjusting to today’s psychological shift about pay transparency
Compliance is just one part of the picture. HR and people leaders also must facilitate the psychological adjustment needed to overcome decades-long taboos around pay conversations.
They’re being faced with questions about compensation that they’ve never had to answer before. Younger workers are particularly interested in greater transparency. Whereas 53% of Baby Boomers say they’re comfortable talking about pay, 89% Gen Z-ers say they are.
The managers and recruiters having those conversations have different needs, all of which directly relate to their own salary ranges and job performance. Managers need to be trained to talk about bonuses and raises, salary ranges, pay equity, and more. Recruiters need to feel confident that they’re making competitive offers and that they’re not violating regulations (like salary history bans) when talking to candidates.
Employees aren’t the only ones with questions. Pay transparency means different things to different people across the business ecosystem. CEOs, investors, and boards want to know that compensation aligns with the larger corporate strategy, and are concerned that too much transparency can invite risk. Financial leaders want to know that your compensation strategy is justified. And everyone is concerned with the long-term financial health of the business.
How innovative people leaders are responding: adaptive transparency
Balancing the needs of regulators, employees, and business partners is a steep challenge for people leaders, and traditional compensation surveys, spreadsheets, and consultants no longer cut it. I believe that’s why a rapidly growing number of people executives are pioneering a new approach that we call adaptive transparency — providing the right information to the right audience at the right moments.
What does adaptive transparency look like in practice?
We recently highlighted 11 companies that define this new era of adaptive transparency. These employers are meeting the pay equity moment by providing their employees with knowledge on key areas about how and why they pay:
- The compensation philosophy that guides the organization’s approach to pay
- The comp data sources used to determine compensation
- The salary range for individual roles and future career paths
- The explanation for why salary ranges are what they are
- Open-door policies to ask questions at any time
- Practical, frequent training for recruiters and people managers to answer their teams questions
These organizations have established the foundational elements of good pay practices. With those elements in place, these HR teams not only meet expectations for pay transparency and steer conversations around pay equity; they’re also pioneering a new standard for compensation, as well as cementing themselves in the increasingly strategic role that people leaders play in guiding the modern business.
Being able to steer these conversations is critical for both employee empowerment and accountability. As Antoine Andrews, Chief Diversity & Social Impact Officer at Momentive, recently said in a High Growth Matters podcast: educating employees on compensation philosophy, benchmarking, and comp data was the single-most impactful step that his organization took towards pay equity. Not only has it helped employees ask better questions about compensation, but it also made HR and people leaders more accountable for delivering answers.
Leaning into complexity to drive equity
As employers take a more active role in driving pay equity, HR and people leaders will continue to be key players in delivering on the expectations of regulators, employees, and stakeholders from the business ecosystem. Making it all work requires resources to gather and analyze comp data, develop effective strategies, and lay out a vision for what compensation looks like at your organization. Many organizations haven’t had to address these challenges before, and if they did, they only needed to scratch the surface.
OPEN Imperative is connecting HR and people with the tools they need to take on the complexity of the pay equity with adaptive transparency. Through resources such as free pay equity reports, and events like the OPEN Summit, we’re accelerating progress towards closing the pay gap once and for all. Join us to be a part of the change.
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Emily Sweet is VP of Social Impact and OPEN Imperative Lead at OpenComp. She writes about topics including pay equity and diversity, equity & inclusion (DEI). A board member of the National Council of Jewish Women, Emily is a veteran philanthropic leader and policy advisor with more than 20 years experience advancing bold solutions to big problems that drive impact and inspire collective action. Connect with her on LinkedIn here.